The Analysis About The Relation Of Asset Securitization And The Sub-prime Crisis

The USA sub-prime mortgage crisis happened in the end of2007. Today,the global economy is becoming more and more open and close, and the global marketis becoming smaller and smaller. This crisis not only caused a depression in Americandomestic market but also aroused the universal economic recession and panic in theworldwide. When we look back to review this sub-prime mortgage crisis, we can knowmore about asset securitization in different angles and levels, which is not only one kindof financial innovation but also the fuse of this economic crisis. What is the relationshipabout the asset securitization and the sub-prime crisis, how to make better use of thisfinancial instrument during the future economic development, furthermore how toprevent the financial crisis to happen again. Under this situation, analyzing andresearching the relationship of asset securitization and the sub-prime crisis is moremeaningful.The paper has analyzed and studied their relationship in five chapters. The chapterone has summarized the scholars and experts’ theoretical perspectives on securitizationand the sub-prime crisis, and also discussed the article’s background and the importance,and also the research technique and its innovation. The chapter two has described thebasic theory about asset securitization and the sub-prime crisis, and mainly introducedMinsky’s financial instability theory. The chapter three has discussed the status of assetsecuritization and its risk-benefit analysis, and further contrast different developmentsituation between Chinese and American asset securitization market. The chapter fourhas discussed the relationship between asset securitization and the sub-prime crisisaccording to financial instability theory. Firstly, describe the sub-prime crisis’ fivedevelopment stages, and analyze to know that asset securitization is the risk’s pathcarrier during the crisis. Secondly, we analyze to know that American household incomegap is so large that it causes low-income families excessive consumption, which lead totheir income-debt’s inequality. And this kind inherent instability in economy is the onlyroot of this crisis. The chapter five has discussed the implications to develop ourselvesasset securitization market. We have analyzed the necessity of developing our domestic asset securitization market. In order to improve the level of withstanding the risk, wehave proposed to perfect our asset securitization market and finance system.